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Checking in on the corporate crackdown

CNBC's Scott Cohn checks in on the state of the corporate crackdown promised by President Bush in 2002.

Do media swarms around Martha Stewart and Michael Rigas of Adelphia, or scenes of WorldCom's Scott Sullivan in handcuffs inspire confidence in business?

In the wake of corporate scandals two years ago, President Bush appointed a corporate fraud task force "to expose and root out corruption."

To date, more than 700 people have been charged, including the former CEO's of Enron and WorldCom. Martha Stewart is one of more than 300 people convicted.

The laws are tougher, too. Sen. Paul Sarbanes, D-Md., helped write a tough anti-corruption law known as the Sarbanes-Oxley Act, which provides for tougher sentences for corporate fraud, new protections for whistleblowers and a requirement that chief executives personally vouch for their books. Sarbanes says it's starting to show results.  “We're getting a good system into place which gives some assurance to investors that they can go into our capital markets with some degree of confidence,” he says.

But two years after the reforms began, some in business are starting to push back — arguing the reforms have gone too far.  Daniel Reynolds is chief financial officer of Calloway's Nursery, a chain of 27 garden centers in Texas.  He says the new reporting requirements of the law are so costly the company decided it could no longer afford to list its shares on the stock exchange. “We sat down and looked at it and determined if we weren't a public company, we could save half a million dollars a year. That's a lot of money for a company our size,” says Reynolds.

One study found the law will cost American businesses $5.5 billion this year. And that has some business groups calling for relief. 

But New York Attorney General Eliot Spitzer, who has been a leader in the fight against corporate crime, worries that the backlash is a sign that some executives return to old habits.  "Will this be like watching somebody else get a speeding ticket — 10, 15 miles down the road, you begin to break the law once again?" asks Spitzer.

Perhaps the most direct measure of confidence in business — the stock market — is now back where it was before the scandals began.  But with the reforms only now taking hold, the jury on corporate America is still out.